Microsoft will reportedly lay off Xbox employees in July to speed up game development and improve sales. It will also cut budgets in many areas of the Xbox division, including marketing. Because of this An anonymous source reports Bloomberg.
Bloomberg’s story comes from “people familiar with the company’s strategy” and an obscure email to Xbox employees from new Xbox CEO Asha Sharma, who took over in February. Bloomberg says it has reviewed the email but has not published the full text.
Microsoft is more likely to use its own term “responsibility margin” instead of “profit margin,” and in an email, Sharma says Xbox’s accountability margin is down to 3%. He says the company has spent $20 billion over the past five years “on continued investment in our content, platform and hardware subsidies,” only to see revenue drop by nearly half a billion “over the same period.” He says that excludes business from the relatively recent acquisition of Activision Blizzard King.
The cuts this July come after more layoffs at Xbox a year ago. Xbox was the main section mentioned In the news about 9,000 layoffs at Microsoft in July 2025. “To position Gaming for continued success and focus on areas of strategic growth, we will exit or reduce certain areas of the business and follow Microsoft’s lead in eliminating layers of management to increase flexibility and efficiency,” Phil Spencer, pre-Sharma he wrote in his memoirs last year.
There have been some promising developments lately, including the Xbox yesterdayWhen Sharma offers some seemingly straight talk about the state of console gaming, namely that the prices are prohibitively high for most people. “We’re at a point where it’s hard to imagine a mass audience paying thousands of dollars to spend on a console generation,” he said. Indeed, Project Helix console it looks incredibly cool, but it’s also incredibly obvious that no one I know would be able to afford it.
Xbox Games Showcase 2026 it wasn’t quite a blockbuster, but it was strong. Neither the Fable reboot, nor the Halo remake, nor the sequel to Town Tale are looking bad so far for any obvious reason. This is great.
However, behind the scenes at Xbox, things look terrible, or it wouldn’t go ahead. To quote Sharma in an interview last weekthings are “not in a healthy place”.
One of the challenges is that Xbox is “stretching our studio system when we need a content pipeline to meet multiple strategies across subscription, streaming and devices,” Sharma’s email said. To me, expanding your studio system seems like a step towards creating a content pipeline, but it’s clearly not saying much here.
If recent statements from his boss, Microsoft CEO Satya Nadella, are any indication, Sharma seems to have stepped into a difficult role in a strange business environment for Xbox indeed. Last year, a few months before Sharma became CEO, Nadella told interviewers that the game’s competitor was video in short form, in other words, when kids can play games, they’re on TikToks, and how can you compete with people. that? Nadella then added, rather wistfully, “The best way to innovate is to have good margins. Because that’s the way you can finance it.” Saying something like saying that the best way to raise happy kids is to have a good job is an understatement.
Last month, Sharma earned goodwill by many players It announced that Xbox will implement all of its Copilot AI features on mobileand it will no longer develop Copilot features for the Xbox console. If these cuts happen, it will likely be back to square one with Xbox players, or perhaps a few steps back from square one.
Bloomberg didn’t have an estimate for the expected job cuts at Xbox, only that it would be “huge,” and an Xbox spokesperson declined Bloomberg’s request for comment.
